In its preliminary first-quarter report, American Eagle Outfitters (AEO) described its results as “disappointing,” prompting the company to reassess its strategies for the months ahead.
For the full year, AEO projects a low single-digit decline in revenue, with operating income expected to range between $360 million and $375 million.
Jay Schottenstein, AEO’s CEO and executive chairman of the board, stated: “We are clearly disappointed with our execution in the first quarter. Merchandising strategies did not drive the results we anticipated, leading to higher promotions and excess inventory. As a result, we have taken an inventory write down on spring and summer goods.”
Preliminary financial results for the first quarter indicate estimated revenue of $1.1 billion, reflecting a 5% decrease compared to the same period last year. Comparable sales dropped by 3%, with American Eagle brand sales declining 2% and Aerie sales falling 4%.
The company expects to report a GAAP operating loss of approximately $85 million for the quarter, alongside an adjusted operating loss of about $68 million. The adjusted loss factors in an inventory charge of nearly $75 million due to seasonal merchandise discounts driven by increased promotional activity.
According to AEO’s fiscal 2024 outlook, shared this past March, first-quarter revenue was initially expected to decline by a mid-single-digit percentage, with operating income estimated between $20 million and $25 million.
The reported GAAP operating loss also includes an additional $17 million in asset impairment and restructuring charges, primarily resulting from the closure of two distribution centers as part of AEO’s supply chain optimization initiatives.
Schottenstein further commented: “We have entered the second quarter in a better position, with inventory more aligned to sales trends. Additionally, we are actively evaluating our forward plans. Our teams continue to work with urgency to strengthen product performance, while improving our buying principles.”
